Tories to promise £10bn cut in taxes

THE Tories are to pledge a £10bn package of tax cuts in a desperate attempt to stop Labour winning a third landslide General Election victory.

But the plan - to be confirmed by Shadow Chancellor Oliver Letwin next month - has provoked a Conservative split amid reports that even some of Michael Howard's closest advisers oppose it.

Mr Letwin took Tory MPs by surprise yesterday by declaring that if his party wins power, he will resign as Chancellor unless he fulfils his pledge to reduce taxation.

Until now, he has refused to make specific commitments amid fears that voters may not believe them, or that his opposite number Gordon Brown may steal the ideas.

Mr Letwin shrugged off his caution after growing demands by Tory MPs terrified that they will lose their seats unless the party comes up with votewinning policies.

The Mail on Sunday has learned that Mr Letwin plans to finalise his plans in the New Year after businessman David James has completed a report for the Tories on how to save money in every Whitehall department.

Conservative sources say that Mr James is expected to report that the Tories could trim £30billion from spending by improving efficiency.

An estimated £12bn will be used pound;1million a day. Now, after a programme of savage job cuts, it is making £1m a day. Large sums are also being spent on modernising machinery and turning the company into a leaner, more effective business capable of withstanding intense competition from the private sector.

Royal Mail's 100 largest business customers account for half of its revenue, and would be sitting targets to fill what the Tories claim to be a shortfall, or 'black hole', in the Government's finances.

Of the remaining £18bn, roughly £10bn would be spent on reducing tax with the rest being diverted to front-line public services to provide extra teachers, doctors and police.

'The final sums have not been worked out but we hope to be able to offer a substantial package of carefully costed tax reductions,' said a Tory insider. 'They will be phased in

gradually, we are not going to do anything reckless.'

The tax package will focus on stamp duty on house purchases, inheritance tax and council tax. In addition the Tories intend to reduce tax and national insurance paid by those on low wages.

They also plan to help middleincome groups such as deputy head teachers, senior nurses and other professionals who have been sucked into the 40 per cent top rate tax band. It

was originally intended for the wealthy, but now affects everyone earning £36,000 and over.

Mr Letwin said yesterday: 'We will make commitments about tax before the next Election.

'They will be cast iron because they will be about what we do a month after the Election in our first Budget and I will resign if we do not do them.'

Some Tories believe Party chairman, advertising mogul Maurice Saatchi - who helped Mrs Thatcher win power in 1979 on a tax-cutting platform - has now persuaded Mr Howard to accept a tax-cutting agenda.

But the proposals have come under fire from other senior Tories, including so-called 'modernisers' who believe the party must turn its back on Thatcher-style policies.

According to some party sources, Mr Howard's senior policy adviser David Cameron, strongly tipped as a future leader, is among those who have warned that the Tories must not go too far on tax cuts.

'We have been down this road before and it just won't work,' said one former Shadow Cabinet Minister last night.

'William Hague started out by promising to improve public services and ended up by making implausible promises to slash tax. Now Michael Howard is making the same mistake.

'It won't wash with the electorate. We have to show them we think that a better health service and education system is more important than tax cuts.'